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Sir, I found out that in different book answer for Absorption costing questions. There are 2 different formats for absorption costing statement:
The differences are lied on the location of variable non-production costs and adjustment for over/(under) absorbed FPOH.
Are these 2 formats also accepted by ACCA?
Format 1: AC Profit Stmt
Sales
Less: Full cost
Opening Inventory
Production cost of new output
Less: Closing Inventory
LESS:VARIABLE NON-PRODUCTION COSTS
Gross Profit
Less: Fixed non-production costs
ADJUSTMENT FOR:
OVER/(UNDER) ABSORBED OF FIXED PRODUCTION OVERHEAD
Profit/(Loss)Format 2: AC Profit Stmt
Sales
Less: Full cost
Opening Inventory
Production cost of new output
Less: Closing Inventory
ADJUSTMENT FOR:
OVER/(UNDER) ABSORBED OF FIXED PRODUCTION OVERHEAD
Gross Profit
LESS:VARIABLE NON-PRODUCTION COSTS
Less: Fixed non-production costs
Profit/(Loss)Thanks
You cannot be asked to produce a full profit statement in the exam.
However, the first statement is not correct – it is the second statement that is correct.
This is all explained in my free lectures on absorption and marginal costing. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
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